OCBC eyes growth as quarterly profit hits record
UPDATED @ 09:16:54 AM 11-05-2012
SINGAPORE, May 11 — Oversea-Chinese Banking Corp, Singapore’s second-largest lender, said today it saw “significant growth opportunities” as quarterly net profit leapt 32 per cent to a record high.
OCBC’s results mirrored strong profit announcements by rivals United Overseas Bank Ltd and DBS Group and showed Singapore lenders remain healthy even as Western banks still feel strains from the financial crisis.
The good performances of the three banks also contrasted with below-par results of blue chips such as commodities giant Wilmar International, which had a surprise 34 per cent drop in quarterly profit, and Singapore Airlines, which reported a loss.
“While the global economic outlook is still mixed, we expect the strength and further expansion of our customer franchise in our key markets will continue to provide us with significant growth opportunities,” OCBC Chief Executive Samuel Tsien said in a statement.
OCBC earned S$832 million (RM2 billion) in the three months ended in March, higher than the S$628 million a year earlier and the S$619 million average forecast of six analysts polled by Reuters.
Its results were helped by stronger loans and fees as well as a rise in contributions from insurance.
Where OCBC lagged its local rivals was in loan margins, with net interest margins rising by just 1 basis point to 1.86 per cent in the first quarter from the preceding three months.
UOB had a 3 basis point rise in loan margins while DBS, Southeast Asia’s largest bank, had a 4 basis point increase.
UOB’s quarterly net profit rose 12 per cent to S$688 million due to higher loan margins and fees. Profit at DBS rose 16 per cent to a record S$933 million.
“Customer loans grew 21 per cent year-on-year to S$135 billion, with broad-based contributions across consumer, corporate and SME customer segments in all key markets,” OCBC said.
It said fee and commission income was unchanged from a year earlier at S$274 million as higher wealth management and loan-related fees were offset by lower brokerage fees and investment banking income.
But OCBC saw treasury income from customer flows rise 26 per cent and net trading income nearly doubled to S$160 million.
OCBC’s insurance arm Great Eastern Holdings last week reported a 65 per cent rise in first quarter net profit to S$262.5 million, helped by higher underwriting profit and gains on investments.
DBS Vickers Securities said in a recent report that OCBC’s focus on non-interest income puts it in a stronger position compared to UOB as returns can rise more quickly in the long term without the need for too much capital.
DBS Vickers does not cover DBS.
OCBC shares have risen around 14 per cent this year, lagging DBS and UOB, which have both gained more than 20 per cent.
Out of 26 brokers tracking OCBC, 10 have a buy or strong buy rating, 10 have a hold and 6 have a sell or strong sell, according to Thomson Reuters data. — Reuters